Linn Energy:Long Term
Linn Energy (NYSE: LINE) is a stock that we have chosen for our 2011 picks. Once again, we want to provide you with additional due diligence about the companies that we recommend. You can check out our company summary here. Additionally, we want to give you others’ opinions about the stocks as well. So here is a look at Linn Energy, and a some speculation for the future by Isac Simon.
With acquisitions worth $3 billion in its kitty and total reserves of up to 2.6 trillion cubic feet equivalent (Tcfe) at the end of 2010, the company faces high expectations to deliver. Since this is a relatively new company, a large amount of debt need not be taken as a complete negative. But with long-term debt of $2.7 billion on its balance sheet, Linn must ramp up production to justify this figure.
There are a few things I find attractive about Linn. EBITDA, the margin of cash income, stands at an impressive 64%. Linn is comfortably meeting its interest expenses, with a healthy EBITDA-to-interest expense ratio of 2.3. And the stock has been outperforming the market consistently for most of the past year. I think investors will start seeing some of the company’s revenue trickling down into net income.
… I do foresee positive changes in these figures, by virtue of Linn’s oil reserves alone. Its free cash flow reserves stood at an impressive $197 million at the end of 2010. That’s a vast improvement from $38 million the year before, and it reflects the company’s improving financial position. With the current strong run in oil prices, this company looks pretty good in the long term.
Despite Linn Energy’s bumpy past since going public, there is hope for the long term. We have hope that Linn will be pulling strong for the remainder of the year. We will try to keep you up to date on the status of Linn down the road. Until then, do some additional research, and hold on to LINE for the long term.
Reported by Isac Simon, Read the entire article and additional reseach here.
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